In Germany, Conflict Is Brewing
Over Public-Sector Landesbanks

DUSSELDORF, Germany -- A fight between Germany's largest banks threatens to change not only the face of the German financial-services industry, but also that of much of Europe.

At issue are public-sector lenders, which in many European countries control between 30% and 40% of the banking business. The public-sector banks in Germany, called landesbanks, historically provided funding and financial advice to their state governments as well as services to their local savings banks, such as foreign trade financing, that they...